Market Spotlight: Capitalizing on the clean energy revolution in APAC

For the energy sector, early 2022 was characterized by rising commodity prices following Russia’s invasion of Ukraine and ongoing supply chain disruptions, as well as the public’s calls to expedite the transition to low-carbon and renewable energy sources. Stakeholders and consumers are increasingly stressing the need for companies to foreground environmental, social and governance (ESG) goals in their growth strategies.

In Australia, where the energy sector dominates a large share of M&A—both domestically and cross-border, with many buyers hailing from APAC’s most advanced economies including Japan, South Korea and, of course, China—these trends are having an outsized impact, with an emphasis on environmental concerns and climate change.

The largest companies are already making moves, with energy majors the most likely to come under pressure to sell-off ‘dirty’ assets to operators with ongoing interests in hydrocarbons, including some private equity players. Smaller outfits in Australia’s energy sector may also benefit from picking up assets from larger streamlining organizations.

Decarbonization and energy diversification driving M&A

Alongside consolidation and portfolio rationalization, key drivers for M&A in the sector will be decarbonization, energy transformation and diversification, with the sell-off of legacy assets generating capital that can be deployed for alternative future-minded investments.

The variety of potential energy-related acquisitions is massive. Some are already well understood with clear growth potential, such as investing directly in solar and wind projects, as well as in new power transmission infrastructure that connects consumers to these renewable energy sources.

Future growth opportunities in clean energy and carbon capture tech

Then there are in-vogue subsectors such as electric vehicle (EV) development and, relatedly, mining for the specific elements, such as nickel, that go into EV batteries. And at the bleeding edge of innovation are hydrogen-related projects and carbon capture, both fields that remain in relatively nascent stages but which will, eventually, prove important.

The clean energy revolution is underway, and Australian companies stand to benefit mightily. The sooner they get on board, the better for all concerned.